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U.S. Economic Confidence Dips During Budget Battle

by Alyssa Brown

Index falls to -19 in September from -13 in August

WASHINGTON, D.C. -- As the fiscal battles in Washington intensified last month and the federal government inched closer to its first shutdown in 17 years, Americans' confidence in the economy deteriorated. Gallup's Economic Confidence Index slid to -19 in September from -13 in August, the worst monthly average since -19 in September 2012.

Gallup's Economic Confidence Index is now off 12 points from May's -7 reading -- which was the most positive monthly average since Gallup began tracking economic confidence daily in January 2008.

Still, Americans' confidence remains toward the higher end of the range Gallup has measured since then. Confidence is substantially more positive than the -52 measured in August 2011, during and after the debt ceiling standoff, and the -32 found in January 2008, prior to the 2008-2009 economic recession and global financial crisis. At the same time, monthly confidence has yet to enter positive territory.

The results for September are based on Gallup Daily tracking interviews, conducted by landline and cellphone, with more than 15,000 Americans.

Gallup's Economic Confidence Index is based on two components: Americans' assessments of current economic conditions in the United States and their perceptions of whether the economy is getting better or worse. Americans' net economic outlook score fell to -18 last month from -11 in August, while their net current conditions score slipped to -19 in September from -14. Consumers' economic outlook grew particularly pessimistic in the latter half of the month as the likelihood of a government shutdown increased.

Democrats' confidence declined nine points to +8 in September, their lowest reading since July 2012. Still, their confidence remains in positive territory and is much higher than that of Republicans and independents. Republicans' confidence slipped by four points to -45 and remains the lowest of the three major partisan groups. Independents' confidence fell two points last month to -21.

Confidence Fell as Shutdown Became More Likely

Gallup's weekly averages show that confidence sharply declined in the second half of the month, as news coverage of the fiscal debate and threat of a government shutdown increased. The most recent average of -22 for the week ending Sept. 29 is down from -15 for the week ending Sept. 15 and matches the low point of the year from early March, when the sequestration cuts took effect. Americans' confidence had improved slightly in the first half of September.

Implications

The uncertainty surrounding the nation's fiscal battles and possible government shutdown shook Americans' confidence in the economy in September. While other factors such as higher mortgage rates and generally stagnant unemployment may have also contributed to Americans' declining confidence, Gallup's Economic Confidence Index dropped sharply in the two weeks leading up to the eventual government shutdown on Oct. 1.

The public's confidence, particularly its perceptions of whether the economy is getting better or worse, will be further tested if the shutdown continues and begins to affect Americans in their daily lives. In addition, the federal government will reach the debt ceiling by Oct. 17, setting the stage for another bitter partisan debate. If the government does not reach an agreement, it could lead to another steep drop in economic confidence, as occurred in July and August 2011 during the last debt ceiling debate.

Despite the political drama surrounding these debates in Washington, Gallup polling during a similar partisan battle in 1995-1996 showed that Americans' views about the U.S. economy generally held steady during and after the government shutdown. At that time, Gallup did not track confidence daily. Thus, Gallup Daily tracking may be picking up more change in economic confidence now -- but it could be short term. Also, confidence in the economy did recover several months after the 2011 debt crisis, and quickly after the fiscal cliff debate and budget sequestration cuts. Thus, Americans' views about the U.S. economy seem to experience longer-term negative effects after the economy takes a hit, as it did during the 2008-2009 recession.

Still, the fiscal debates may be diverting lawmakers' attention away from creating jobs and addressing what the public sees as the top problem facing the nation: the economy.

Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Survey Methods

Results for this Gallup poll are based on telephone interviews conducted Sept. 1-30, 2013, on the Gallup Daily tracking survey, with a random sample of 15,283 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.

For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error is ±1 percentage point.

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each sample of national adults includes a minimum quota of 50% cellphone respondents and 50% landline respondents, with additional minimum quotas by region. Landline and cell telephone numbers are selected using random-digit-dial methods. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted to correct for unequal selection probability, nonresponse, and double coverage of landline and cell users in the two sampling frames. They are also weighted to match the national demographics of gender, age, race, Hispanic ethnicity, education, region, population density, and phone status (cellphone only/landline only/both, and cellphone mostly). Demographic weighting targets are based on the March 2012 Current Population Survey figures for the aged 18 and older U.S. population. Phone status targets are based on the July-December 2011 National Health Interview Survey. Population density targets are based on the 2010 census. All reported margins of sampling error include the computed design effects for weighting.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit www.gallup.com.

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